G7 finance chiefs back plan to tap frozen Russian assets to finance Ukraine

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G7 finance ministers have backed the idea of ​​issuing a loan to Ukraine, secured by profits from frozen Russian assets, in an effort to secure financing for kyiv beyond 2024.

The ministers’ discussions were based on a US proposal that circulated before the meeting in Stresa, Italy, to issue a loan of around $50 billion that would be repaid with profits of around €190 billion in assets from the Russian central bank. Russian assets are trapped in the Belgian central securities depository Euroclear.

Ministers said they were “making progress” on options to “advance” earnings, according to a draft statement seen by the Financial Times. They added that G7 leaders would be presented with options on how to construct the loan before a summit in June.

They also vowed to continue pressuring China to reduce industrial subsidies they say are putting Western rivals out of business, and said implementing the biggest global tax deal in more than a century was “a top priority.”

The G7 – a group of advanced economies that includes all of Ukraine’s major Western allies – wants to secure future financing for kyiv beyond this year, when critical elections are held on both sides of the Atlantic.

Since the Russian invasion, Ukraine has relied heavily on Western aid for military support and funding crucial public services.

Many details of the loan still need to be agreed upon, including the amount, who will issue it and how it will be secured if Ukraine defaults on its debt or if profits fail to materialize, according to people familiar with the discussions.

Europeans are particularly concerned about “equitably sharing risks,” one official said, fearing that Europe will bear the brunt of financial and legal risks and retaliation from Russia because most assets are located on the continent.

The United States has also pressured the rest of the G7 to step up its rhetoric on trade tensions with Beijing.

China’s manufacturing subsidies undermined “our workers, industries and economic resilience,” the draft statement said, adding that the group “will continue to monitor the potential negative impacts of overcapacity and consider taking steps to ensure a level playing field.” “.

However, there is disagreement over what those next steps might be.

While the Biden Administration has already quadrupled tariffs on Chinese electric vehicles and introduced stricter levies on other clean technology imports to protect green manufacturing jobs in the United States, the European Commission has favored investigations into Chinese panel subsidies. solar, railways and electric vehicles. Beijing retaliated against both American and European chemical imports.

EU members, which rely more on export trade with Beijing, showed greater reluctance to impose levies for fear of an escalation of a trade war. “Trade wars only have losers, they cannot be won,” Christian Lindner, Germany’s finance minister, said this week.

While ministers said making the two-tier global tax deal agreed in 2021 by more than 135 countries a reality was a “top priority”, the end-June deadline to sign a treaty underpinning a part.

Ministers, including US Treasury Secretary Janet Yellen, said India’s opposition was slowing progress on so-called Pillar One, which reallocates part of countries’ right to tax multinational companies to places where they make sales.

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